A, B, & C
Net cash flow and timeline depiction For each of the following projects, determine the net cash flows and depict the cash flows on a timeline a. A project that requires an initial investment of $121.000 and will generate annual operating cash inflows of $28,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $4,800 cash outflow b. A new machine with an installed cost of $81,000. Sale of the old machine will yield $26,000 after taxes Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20,000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $24,000 after taxes, which is $9.000 greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6. c. An asset that requires an initial investment of $2 million and will yield annual operating cash inflows of $309,000 for each of the next 12 years Operating cash outlays will be $19,000 for each year except year 5, when an overhaul requiring an additional cash outlay of $508,000 will be required. The asser's liquidation value at the end of year 12 is expected to be zero. a. A project that requires an initial investment of $121,000 and will generate annual operating cash inflows of $28,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $4800 cash outflow (Select all the choices that apply) A. This is a conventional cash flow pattern, where the cash inflows are of equal size, which is referred to as an annuity B. Year 0 1 2 16 17 18 Cash flow - S121,000 $23,200 $23 200 $23 200 $23,200 $23,200 $23,200 C. At year, the initial investment will be - $121,000 For each of the years 1 thru 18. the net cash flow will be $28,000 - $4800 = $23,200 D. At year 0, the initial investment will be - $121,000. For each of the years 1 thru 18, the net cash flow will be $28,000 TUTU years 7 thru 18, the ner cash now wil de 328,00 b. A new machine with an installed cost of $81,000. Sale of the old machine will yield $26,000 after taxes Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20,000 in each year of a 6-year period. At the end of year 6 liquidation of the new machine will yield $24,000 after taxes, which is $9,000 greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6 (Select all the choices that apply) A Year Cash flow - $55,000 $20,000 $20,000 $20.000 $20,000 $20,000 $29.000 B. This is a conventional cash flow pattern, where the subsequent cash inflows vary, which is referred to as a more stream C. At year the initial investment will be - $81,000 $26.000 = - $55,000 For each of the years 1 thru 5, the net cash flow will be $20.000. At year 6, the net cash flow will be $20,000+ $24,000 - $15,000 = $29,000 D. Year 0 1 Cash flow - $55,000 $20 000 $20,000 $20000 $20 m 200 000 MUU 520,000 $20,000 $20,000 c. An asset that requires an initial investment of $2 million and will yield annual operating cash inflows of $309,000 for each of the next 12 years Operating cash outlays will be $19.000 for each year except year 5, when an overhaul requiring an additional cash outlay of $508,000 will be required The asses liquidation value at the end of year 12 is expected to be zero. (Select all the choices that apply) A At year 0, the initial investment will be - $2.000.000. For each of the years 1 thru 4 and thru 12. the net cash flow will be $300.000 At year the net cash flow will be $300.000 - $500.000 - $190.000 B. This is a nonconventional cash flow pattern with several cash flow series of equalse, which is referred to as an embedded arvut c. Year 0 11 12 Cash flow - $2 million $290,000 $290,000 - $190,000 $290,000 $290,000 $290.000 U D. Al year, the initial investment will be - $2.000.000. For each of the years thru 4 and 6 thru 12, the net cash flow will be $309,000 - $19,000 = $290,000 At year 5, the net cash flow will be $309,000 - $508,000 = - $199.000
